How the man in love with a bank launched a fund that screwed the customers
There are times when the Right leaves me just as frustrated as the Left in its willingness to excuse anything – rather than give way and accept that the other side has a point. After three hours of sleep-inducing, wriggling, jargobollocks from Diamond Bob – a man so obviously covered in self-exculpating slime, he made Nixon look like Snow White – Dan Hannan offers this smart-arsed, half-arsed tweet:
‘So, chaps: still think that what the financial sector needs is more regulators?’
His smug, Tory point is that the regulators didn’t stop Barclays from behaving like hobgoblins who were rejected by the other goblins for being too heavy on the hobbing and goblinning…so why have regulators? Hurrah! And like most Conservative observations, it plays the human nature card in a sort of anti-Hobbesian context: ‘we’re all nasty and brutish, so go for it: bring on the Christians – and let’s make sure the lions have nothing to eat beforehand’.
But to the closed Tory mind, the reality that every deregulation from drink to employment has been laid onto a suppuratingly awful soci0-economic culture (and thus failed miserably) has yet to dawn. Poor Dan is still locked in the dark night of Baroness Thatcher’s soulless philosophy.
What Bob Diamond did today was start on Lieborgate where James Murdoch left off on Hackgate: excuse me sir I didn’t quite catch the question, I love my company, no I was not told that sir, if I can just refer you to this paragraph here, what these people did was totally reprehensible….on and on it went, although this time the TSC’s response was considerably less indulgent. His thinly disguised display of arrogant subservience went down like a cip of cold sick, and left nobody – but nobody – in the room in any doubt about the nature of this shady man’s character.
So perhaps this is the right time to remind people of that of which the Diamond Geezer is capable.
Diamond Bob was a little light on character judgement himself when it came to forming a partnership between Barcap and Geneva-based investment outfit Avendis a few years back.
Avendis Capital was founded in February 2001 by four partners – Eric de Sangues, Yannis Bilquez, David Benichou and Marco Rigo. In 2002 the company diversified into investment management and launched Avendis Enhanced Fixed Income, described by de Sangues at the time as one of the world’s first ‘correlation hedge funds’. The use of a meaningless four-syllable jargon word there is par for the course with Eric: in 2005 he gave out with this complete wobbly-bollocks to Hedge Weekly:
“The fund develops relative value strategies in the capital structure of synthetic static CDOs through 2 different approaches both quantitatively driven. Bespoke static Synthetic CDO Tranches are used to build exposure to investment grade credit idiosyncratic risk [and we] trade Standard index tranches of iTraxxIG and DJ CDX IG. The strategy takes advantage of structural dislocations in the correlation market, and increased liquidity of the Index Tranche market, to generate alpha through momentum and mean reverting relative value trades in the capital structure.”
There are a great many former Barcap/Avendis investors who would give a lot for just one chance to exert some structural dislocations closely correlated with Eric’s neck, but anyway Barcap’s Diamond Geezer liked the cut of his jib, and in 2006 together they launched a fund called Golden Key.
Golden Key was a type of structured investment vehicle (SIV-lite) pioneered by Barclays Capital. So Diamond can’t wriggle put of this by citing ‘bad advice’: Avendis was merely the vehicle for something Barcap had already invented. It was based on toxic mortgage crap: and as this was already a known risk, one could debate for hours as to Barclays’ motives for wanting a vehicle not called Barclays to market it. Certainly, shifting several billion in radioactive isotopes off the books is never a bad idea.
The whole thing turned to poo-poo quite quickly.
On 30th November 2007, Yannis Biquez was arrested by the Geneva police and charged with offences involving ‘betraying the confidence and embezzling the money of investors’. He was eventually found guilty of embezzzling $20m in 2008, but just three weeks after his arrest, Barclays Capital lent Avendis $1.5 billion. The reason given to the shareholders was ‘severe liquidity troubles in the financial markets’, something of an understatement as the loan was equal to the value of the entire assets under management by Avendis.
Barclays shareholders may well ask themselves whether this was an entirely wise move in the circumstances. While regulators might wonder if other agendas were in play.
On November 2008, there was more bad news: the authorities issued fines totalling €100,000 against Avendis Capital SA, for ignoring short-selling rules issued by the EU. This was also the year that the company’s investors got together to sue Avendis…. because they believed BarCap had used the SIV-lites, via borrowings, to take the toxic securities off Barclays’ accounts. The case alleged that Avendis directors and senior Barcap investors all conspired to carry out this dumping of cancerous junk, but I’ve no idea what gave them that idea. Heard in New York,
Barclays hired a smart lawyer to find a hole in it the case was thrown out on a technicality.
After reading yesterday’s news about the outbreak of speech impediments among the accused, Terence Corcoran at the Financial Post described Barclays and Diamond as ‘the victims’ in all this chicanery. While I posted something similar myself last week, I didn’t run to calling them victims: they are victims in roughly the same way that Hamas are victims: they had some pretty outrageously anti-social ideas long before Paul Tucker & Co gave them any more.
But there we have it again with the Left-Right-Left-Right robotics. Tom Watson’s commendable attack on Newscorp has not extended to Trinity Mirror. For the Left, every attempt by Israel to defend itself against anti-democratic illiberal Islamism is suffused with evil. For the American elite, every shit on the planet is fair game as an ally potential so long as they’re willing to defend US interests. Boris Johnson defended Newscorp’s indefensible behaviour on te grounds of the accusations being ‘left wing poppycock’.
What enables the bad guys to win more often than not is that the good guys tend to be (a) more interested in their families (b) busy doing socially good stuff elsewhere (c) modest (d) endlessly tolerant and, above all, (e) hopelessly divided by loyalty. I wish more of them would wake up to how they are being played like a dopey salmon on a strong line.